Wednesday, August 11, 2010

Beware the VAT--Why the Consumption Tax is Possible

From CNN/Fortune. As far as I can see, it's the only tax scheme that doesn't have a lobby against it, and would be the path of least resistance.

"Right now, the VAT appears so radical that it's gained little support in Congress and isn't even endorsed by the Obama administration. But (Congressman) Ryan told me that a VAT is far more likely than most Americans imagine. The reason isn't the one that many experts are forecasting -- that the Fiscal Commission appointed by President Obama will recommend the controversial levy. "I don't believe the Commission will advocate a VAT," Ryan told me, adding that he doesn't speak for his fellow members.

On the contrary, Ryan fears another path to the VAT. "It cannot pass without a fiscal crisis," he warns. "Our leaders are now courting one with big spending and by adding new entitlements. They know in the back of their minds that if a fiscal crisis comes, they can throw a VAT on top of that."


"The VAT's appeal is that it opens an enormous source of revenue while the income tax severely limits the amount of new money the government can collect. It's clear that the tax increases that the administration advocates won't come close to solving the debt problem. By its own estimates, the rate hike for high-earners planned for 2011 would reduce projected debt by just $620 billion, or a paltry 3% by 2020, and that's assuming the higher taxes do nothing to slow economic growth, a highly questionable assumption.

It's practically certain that a credit collapse is looming. The only question is when."


"The rub is that once a VAT becomes law, it's bound to grow far larger. And no country that has ever enacted a VAT has seen is repealed. "A VAT would permanently increase the size of government," says Foster. Indeed, it's been the engine that's raised government spending as a portion of national income, frequently to well over 50%, in every country that has one, from Germany to Japan.

Once the VAT gets its nose under the tent, the beast will follow."

This is what I'm afraid of--once the Congressional beast gets a taste of the wonderful food, they'll want more and more, and then we become Britain. Anybody with a job over in Europe either works for the government or has a business in the family that ONLY hires family.

Like the much-flaunted Fair Tax, there's nothing to stop the VAT from getting increased. Fair Tax would start out at 23%, but where would it end...100%? As for VAT, rumor has it starting out at 21%, but again, where would it end?

Fair Tax is aimed to replace all the other taxes we pay now. VAT is on top of what we pay now. Both can be easily gotten around with judicious use of thrift stores, yard sales, and the general use of used stuff in our lives--no more buying off-the-rack. Both tax plans would nuke our economy once the public learns how to avoid them. This is what Obama and his administration want to happen--nuke our economy to spread the wealth to current Third World countries.

Taken to the extreme outcome, I see us returning to England's feudal times, when we'd grow crops to pay our taxes--an actual job would be out of the question (given the hiring choices: government, Wall St., or family), yet we'd still be taxed on SOMETHING if not assets. How would we pay these taxes without jobs? Just like the peasants did back in feudal times--with various crops.

Taken one step further, most of us would find a way to leave this country, returning it back to the wilderness (albeit developed now) we found some 200+ years ago. Obama's dream would be realized, and America would be completely collapsed.

It's not too late to stop this madness, and some of us are taking the initiative at the ballot box as we can.


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